As HUD labors over changes to its counseling requirements for reverse mortgage recipients, questions persist about what expanded role the government – and by decree, individual private lenders – will play in attempting to ensure, or perhaps, even guarantee, that seniors fully understand all aspects and ramifications of the deal they are making.

“Strengthening objectivity requirements is absolutely key,” says Daniel Fenton, senior housing director for Money Management International (MMI), a non-profit counseling agency. He notes that “the devil is in the details” when it comes to striking the right balance between too little and too much counseling intervention. "HUD’s new HECM counseling protocol appears to strike a reasonable balance by requiring counseling agencies to use their judgment to assess level of understanding, but providing an objective assessment tool for counselors to use to evaluate understanding. In this way,” he goes on, “judgments are not simply subjective counselor opinions as whether someone should get a [counseled] certificate. 

Does that turn counselors into gatekeepers? “In a sense, yes,” Fenton replies. “However the rationale guiding counselor’s decisions has been clearly prescribed by HUD and will be based on observable facts rather than the personal views of any particular counselors."

HUD also is mulling the issue of how much responsibility lenders should have in assessing a senior applicant’s financial situation. Should they, for example, ultimately say whether borrowers have the capability to meet ongoing obligations after getting a reverse mortgage? Under one proposal floating through various state capitals, loan officers would have to conduct a “financial assessment” of every borrower to review his or her monthly income, assets and recurring expenses.

Neil J. Morse has been a communications professional working in the mortgage finance industry for more than a decade, currently specializing in the reverse mortgage sector. He can be reached at [email protected]